New from Prudential: Level Term Life to Age 65

The purpose of life insurance is to protect the economic well-being of your beneficiaries when you die. It is an instrument used to help bridge the gap between what they have and what they need in order to survive.

However, life insurance ownership/coverage unfortunately remains low as U.S. families have less disposable income than they did in the past. With this being said, families have had to make difficult decisions on what financial priorities take precedence, which may not include life insurance.

According to a 2013 report by LIMRA, a worldwide research organization, 30 percent of U.S. households have no life insurance, only 44 percent have an individual life insurance policy and 50 percent of U.S. households say they need more coverage.

LIMRA cites affordability and lack of life insurance knowledge as the two biggest reasons why consumers are reluctant to purchase a policy. Eighty-six percent of consumers who believe they need life insurance have not purchased a policy because they think it is too expensive.

Consumers have also avoided purchasing a policy because they view the insurance industry as confusing and/or difficult to understand. Selecting the right policy, fear of making the wrong decision and overall lack of insurance knowledge are among consumers’ top concerns.

This makes communication between consumers and life insurance companies an integral element in the life insurance buying process.

A new joint study between LIMRA and Maddock Douglas revealed there are 19 million “stuck shoppers” of life insurance in the United States – that is, consumers who believe life insurance is valuable and necessary but have been derailed during the shopping process.

“Our focus groups consistently described shopping for life insurance and other financial products as confusing, frustrating and overwhelming, which kept them from making a decision on what to buy,” said LIMRA research director Scott Kallenbach in a press release. “The words, images and messages used to explain financial product don’t seem realistic or relatable to many of these consumers.”

The study consisted of more than 1,500 online interviews to quantify consumer attitudes, behaviors and perceptions related to insurance industry language and 30 in-person interviews where consumers shared their experiences, emotions and feelings related to insurance industry language and images.

“Our research was designed to figure out how companies can improve their communications to help these consumers get the coverage they need and want,” Kallenbach said.

The joint study uncovered a key factor in the “stuck shopper” dilemma – communication from the life insurance industry lacks authenticity.

Authentic communications is more than just using everyday language and laymen’s terms, but also including relate-able visuals and attainable goals. Consumers want information broken down as simple as possible and desire easy-to-read graphics.

There are six elements that make up authentic communication:

1. Easy to Understand – Language that we use every day

2. Down to Earth – images that feel realistic

3. Memorable – Communication that is interesting

4. Positive – Messages that are warm and comforting

5. Credible – Sources of information that are trustworthy

6. Relevant – Communication that says the company understands, and who they are

Consumers said one of the biggest obstacles was that they did not understand many of the terms used insurers’ materials.

For instance, consumers were not confident that they could effectively define the following terms – underwriting, permanent life insurance, rider, guarantee, living benefit, and annuity.

“Authentic communication is much more than a revamping of marketing and ad campaigns,” said Maria Ferrante-Schepis, managing principal for Insurance and Financial Services at Maddock Douglas. “It is a major opportunity if internalized by the entire culture of an insurance company.”

Consumers should expect to see insurance companies adjusting their communications and advertising efforts to fit the research discovered in this joint study, as consumer perspective is key to financial growth. If the consumer does not understand the product or communication used to promote it, the product will not sell.

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Consumer Insurance Guide SM provides a wide selection of originally-authored articles and expert advice targeted to the self-directed insurance shopper. Our mission is to provide consumers with useful, money-saving information on all things having to do with making sound insurance purchase decisions.